I work with special needs financial planning, and I think everyones missing a detail - check whether your nephew has other income sources that might qualify. Even part-time or gig work counts! If he could earn even a small amount from actual employment (like $2-3k annually), that would enable additional ABLE contributions up to that earned amount. Many of my clients do minimal part-time work specifically for this purpose.

This is such a helpful discussion! I'm dealing with a similar situation with my sister's ABLE account. Based on everything shared here, it sounds like the consensus is that W-2 third party sick pay doesn't qualify for the additional ABLE contribution beyond the $18k limit. The key distinction seems to be that while sick pay counts as "earned income" for many tax purposes, the ABLE additional contribution provision specifically targets current employment as a work incentive. The "earning wages" language in state forms appears to reflect this narrower federal intent. @Alice Coleman - that's a great point about exploring minimal employment options! Even small amounts of actual wages could unlock that additional contribution space. For someone receiving $22.5k in sick pay, adding even $5k in actual earned income could provide significant additional tax-advantaged savings opportunities. Has anyone here actually tried making the additional contribution with only sick pay income and had issues, or is this all based on guidance and interpretations? I'm curious if there are any real-world examples of problems arising.

4 I had a similar sales business with big contractor expenses and ended up getting audited because of this exact issue. Make sure you also have business justification for each contractor - showing WHY you needed their services and how they related to your revenue generation. That was the first thing the IRS asked me about, even before wanting to see proof of payments or 1099s. For what it's worth, the auditor told me that while missing 1099s might trigger a review, what they're really looking for is whether the expenses are legitimate and reasonable for your business type and size. In my case, having detailed contracts with clear work deliverables was what ultimately saved me. For your S-Corp transition, this is even more important because the IRS scrutinizes S-Corps more closely for both unreasonable compensation issues and expense substantiation.

This is a really common issue for small businesses, and I appreciate everyone sharing their experiences here. One thing I'd add that hasn't been mentioned yet is the importance of backup withholding requirements. When contractors refuse to provide W-9s, you're technically supposed to withhold 24% of their payments for backup withholding and send that to the IRS. Most small business owners don't know this rule, and since you've already paid them in full, you can't go back and collect it now. However, documenting that you requested the W-9s multiple times (and their refusal) is crucial. The IRS understands that you can't force someone to provide their tax information, but they expect you to make reasonable efforts. For your S-Corp transition, definitely get a solid contract template that requires W-9 completion before any payments are made. I learned this lesson the hard way after dealing with similar contractor issues. Also, consider requiring new contractors to complete their tax forms as part of your onboarding process rather than waiting until tax season. Your 75% deduction rate will definitely get attention if you're audited, but if you have legitimate business expenses with proper documentation showing the work was actually performed and necessary for revenue generation, you should be fine. Just make sure every expense has a clear business purpose that you can articulate.

This is such a common problem! The key issue is that the withholding tables assume you're the only earner in your household when you select "Married." When both spouses work and earn similar amounts, you end up in higher tax brackets than the withholding calculations expect. Here's what you need to do immediately: 1. **Update both W-4 forms** - The new 2020+ W-4 is completely different from the old allowances system. You both need to fill out fresh forms. 2. **Check the "Two Jobs" box** - In Step 2 of the new W-4, there's a checkbox for couples where both spouses work. This automatically adjusts your withholding upward. 3. **Only ONE spouse claims the kids** - Don't both claim your 3 children. The higher earner should claim them in Step 3, the other spouse leaves it blank. 4. **Consider extra withholding** - You can specify an additional dollar amount to be withheld each paycheck in Step 4(c). Based on owing $2,800, you might want each of you to have an extra $50-75 withheld per paycheck. The IRS also has a withholding calculator on their website that can help you figure out the exact amounts. Don't let this drag on another year - update those W-4s now and you should see the difference in your next paychecks!

This is exactly what happened to us! We were in the same boat - both claiming 0 on our old W-4s and still owing every year. The problem is that "married" withholding assumes only one spouse works, so when you both have jobs with similar incomes, you end up in higher tax brackets than expected. Here's what finally fixed it for us: We both filled out brand new W-4 forms and checked the "Two Jobs" box in Step 2. That single checkbox made a huge difference! We also made sure only one of us claimed our kids (I claimed all three since my salary is slightly higher), and the other spouse left Step 3 blank. Since you owed $2,800 this year, you might also want to add some extra withholding in Step 4(c) just to be safe. We added $40 per paycheck each after our first year with the new forms, and now we get a small refund instead of owing. Don't wait - update those W-4s right away! Your HR departments should have the current forms, and you'll see the increased withholding in your next paychecks.

Has anyone used TurboTax to handle this scenario? I'm in a similar situation and wondering if their software can properly calculate the AMT implications or if I need to find a specialized tax preparer.

I went through almost the exact same situation with my startup options in 2021. One thing that really helped me was keeping detailed records of all the valuation documents from the exercise date - the 409A valuation report, exercise confirmation, and any board resolutions that established the fair market value. When I eventually sold some shares at a loss two years later, having those original valuation documents made it much easier for my tax preparer to properly calculate both my regular tax basis and AMT basis. The IRS may want to see proof of how that $130 per share value was determined, especially since it ended up being significantly higher than the IPO price. Also, don't forget that if you paid AMT in 2022 because of the exercise, you'll likely have AMT credits that can be carried forward indefinitely. These credits can offset regular tax in future years when your regular tax exceeds your AMT. It's one small silver lining in an otherwise frustrating situation.

Look, I thought the same thing until I wasted an entire day trying to get through to the IRS. The free options are great if you have unlimited time to figure things out yourself. But when you need answers now because bills are due, spending a few bucks to save hours of frustration is totally worth it. These tools aren't claiming to speed up your refund - they just help you understand what's actually happening instead of staring at a progress bar that hasn't moved in weeks.

I'm in the exact same boat - filed February 8th, NetSpend account, WMR showing approved since March 1st but still nothing deposited. Called NetSpend twice and they confirmed no rejected deposits on their end. The uncertainty is killing me because I have rent due next Friday. Based on what everyone's saying about the additional verification for prepaid cards, it sounds like this is just how the system works unfortunately. At least knowing it's not just me makes me feel a bit better. Going to try calling the IRS tomorrow to see if they can give me any timeline, even though I'm dreading that hold time!